This section is from the book "The Law Of Contracts", by William Herbert Page. Also available from Amazon: Commercial Contracts: A Practical Guide to Deals, Contracts, Agreements and Promises.
If, however, the surety is held on a bond whereby he is liable only in case judgment is rendered against his principal, strong reasons exist for holding that the surety is not liable if the principal is discharged in bankruptcy, and invokes such discharge in the action in which such bond has been given and thereby prevents judgment from being rendered against him "The cases are numerous in which it has been held, and we believe correctly, that if one is bound as surety for another to pay any judgment that may be rendered in a specified action, if the judgment is defeated by the bankruptcy of the person for whom the obligation is assumed, the surety will be released. The obvious reason is that the event has not happened on which the liability of the surety was to depend."1 For these reasons the discharge of the principal in bankruptcy has been held to discharge the surety from liability on a capias bond,2 a bond in attachment,3 or a bond given to discharge a garnishment,4 or an appeal bond.5
The language of the bankrupt act, however, provides expressly that the liability of a surety is not affected by the discharge of the bankrupt;6 and this is applied in many jurisdictions to liabilities of this sort.7 The reasons for holding that discharge is personal to the bankrupt are as strong in a case of this sort as in any other. Accordingly, it is held that sureties on such bonds,8 such as an attachment bond,9 or an injunction bond,10 or a bond for redelivery of goods taken on execution,11 or on a poor debtor's recognizance,12 are not released by the discharge of their principal in bankruptcy. Some cases reach this result in harmony with the general principles on the subject by holding that a special judgment, pro forma only,13 or a judgment, execution on which is perpetually enjoined,14 should be rendered against the bankrupt to fix the liability of the sureties. If an attachment becomes void, as being an invalid preference, by the institution of proceedings in bankruptcy within four months thereafter, such proceedings in bankruptcy which result in a discharge to the bankrupt, operate as a discharge of the surety on his bond.15 The discharge of the surety is, however, due to the invalidity of the attachment, and not primarily to the discharge of the bankrupt.16
Ohio. Childs v. Childs, 10 O. S. 339, 75 Am. Dec. 512.
Wisconsin. Hill v. Trainer, 49 Wis. 537, 5 N. W. 926.
5 National Bank v. Sawyer, 177 Mass. 490, 83 Am. St. Rep. 292, 59 N. E. 76.
6 National Bank v. Sawyer, 177 Mass. 490, 83 Am. St. Rep. 292, 59 N. E. 76.
7 Abentlroth v. Van Dolsen, 131 U. S. 66, 33 L. cd. 57; Hill v. Trainer, 49 Wis. 537.
1 Wolf v. Stix, 99 U. S. 1, 8, 25 L. ed. 309 [quoted in Goyer Co. v. Jones, 79 Miss. 253, 256, 30 So. 651].
2 Keyes v. Bennett, 218 III. 625, 75 N. E. 1075; Bryant v. Kinyon, 127 Mich. 152, 53 L. R. A. 801, 86 N. W. 531; Barber v. Rodgers, 71 Pa. St. 362.
3Braley v. Boomer, 116 Mass. 527; Johnson v. Collins, 117 Mass. 343.
4Klipstein v. Allen-Miles Co., 136 Fed. 385.
5 Alabama. Young v. Howe, 150 Ala. 157, 43 So. 488.
Georgia. Odell v. Wootten, 38 Ga. 224.
Illinois. House v. Schnadig, 235 111. 301, 85 N. E. 395.
Mississippi. Goyer Co. v. Jones, 79 Miss.. 253, 30 So. 651.
New York. Knapp v. Anderson, 71 N. Y. 466.
North Carolina. Lafoon v. Kerner, 138 N. Car. 281, 50 S. E. 654.
6 See Sec. 16, Act of 1898.
7Stull v. Beddeo, 78 Neb. 114, 14 L. R. A. (N.S.) 507, 110 N. W. 861.
8 Stull v. Beddeo, 78 Neb. 114, 14 L. R. A. (N.S ) 507, 110 N. W. 861.
9 Flagg v. Tyler, 6 Maes. 33; Mc-Combs v. Allen, 82 N. Y. 114.
10Stull v. Beddeo, 78 Neb. 114, 14 L. R. A. (N.S ) 507, 110 N. W. 861.
11Pinkard v. Willis, 24 Tex. Civ. App. 69, 57 S. W. 891.
12 Carpenter v. Goddard, 191 Mass. 64, 76 N. E. 953.
13 Rosenthal v. Nove, 175 Mass. 559, 78 Am. St. Rep. 512, 56 N. E. 884. (Judgment provided for by statute.)
14 United States. Hill v. Harding, 130 U. S. 699, 32 L. ed. 1083.
Connecticut. Schunack v. Art Metal Novelty Co., 84 Conn. 331, 80 Atl. 290.
Michigan. Brown & Brown Coal Co. v. Antezak, 164 Mich. 110, 128 N. W. 774, 130 N. W. 305.
Pennsylvania. United States Wind Engine Co. & Pump Co. v. North Penn. Iron Co., 227 Pa. St. 262, 75 Atl. 1094.
Rhode Island. Butterick Publishing Co. v. E. F. Bowen Co., 33 R. I. 40, 80 Atl. 277; Wilcox v. Hersch, - R. I. -, 110 Atl. 409.
15Casady v. Hartzell, 171 la. 325, 151 N. W. 97; Crook-Horner Co. v. Gilpin, 112 Md. 1, 28 L. R. A. (N.S.) 233, 75 Atl. 1049.
16" • • • the bankrupt act (1898) declares that attachments or other liens obtained at any time within four months prior to the filing of a petition in bankruptcy against an insolvent person shall be deemed null and void in case he is adjudicated a bankrupt, and the property affected by the attachment or other lien shall be deemed wholly discharged and released from the same, and shall pass to the trustee as a part of the estate of the bankrupt. Now, it is quite clear, we think, if no bond had been filed, the attachment having issued within four months prior to the filing of the petition, the lien, attachment, and all the proceedings, would have been null and void, by the terms and operation of the bankrupt act. In Hill v. Harding, 130 U. S. 703, 32 L. ed. 1084, * • * , it is said the bond or recognizance takes the place of the attachment as a security for the debt of the attaching creditor; they can not dispute the election, given to the debtor by statute, of substituting the new security for the old one.
"In Corner v. Mallory, 31 Md. 468, this court said the period of four months was fixed as a period within which no preference should be gained by one creditor by attachment over the claims of other creditors of the bankrupt. And the law effects no hardships in dissolving such attachments, as the creditor's claim is nob impaired, and he is only deprived of a lien and priority that he might otherwise obtain to the prejudice of other creditors, and in violation of the policy of the law, which is to effect a fair and equal distribution of the property of the bankrupt among all his creditors.